Authorities try to get handle on fraud cases

Wednesday

Jan 18, 2012 at 6:50 PM

Sour economy blamed for jump in suspected fraud cases.

Brian FreskosBrian.Freskos@StarNewsOnline.com

To Scott Rudisill, the pitch sounded like a good deal: He loans an acquaintance $2,500, and in exchange, he gets a promissory note and a Rolex watch to hold as collateral. Rudisill said the borrower, John Ponos, assured him the watch was worth $10,000. So even if Ponos defaulted, Rudisill held a piece of jewelry valued four times as much. Or so Rudisill thought. "It was a fake," Rudisill later discovered about the watch. "I had a rock in a box." Rudisill claims to be among millions defrauded each year in the United States, a crime that touches virtually every corner of society, evaporating trillions in public and private revenue annually. Fraud, not a new concept, has long been a topic of discussion among law enforcement and academic circles. But a bitter bout of economic hardship and a series of high-profile cases in recent years (think Bernie Madoff) has nudged the subject onto center stage. "There's definitely an uptick," Allan Bachman, education manager at the Association of Certified Fraud Examiners, said about the fresh attention being paid to swindles and schemes. "You don't have to look far in the business section of a newspaper to find the word ‘fraud' in a headline; whereas, say, five years ago, not so much." Rudisill, a 60-year-old yacht captain who calls Wrightsville Beach home, seemed glad to talk when a reporter phoned him about his case. Not long after a jeweler informed him that the watch was counterfeit, Rudisill said he contacted the Wilmington Police Department about the exchange. Ponos, Rudisill said, never paid off the loan. He has since been charged with obtaining property by false pretenses, and is awaiting his day in court. Ponos, whose most recent listed address was in the gated Landfall community, referred questions to his attorney at the public defender's office, who did not return a phone message Wednesday.How many Americans are bilked every year is a difficult figure to quantify, as is the amount of money they collectively lose as a result. Unlike Rudisill, some alleged victims feel disinclined, even embarrassed, to report being tricked. Others fall prey to such slick schemes they have no idea they were duped."Many people report feelings of shame upon having to admit that they've been deceived," said Doug Carriker, an assistant district attorney in New Hanover County who has prosecuted white-collar crime. "We hear this particularly among elderly victims of fraud. They somehow blame themselves." Another reason that fraud losses are difficult to measure is that the term itself encompasses a broad range of sectors, from private individuals and small businesses to government services and insurance companies. And a mechanism to aggregate information from all of them is nonexistent. As Mike Maume, associate professor of criminology at the University of North Carolina Wilmington, put it, "There's no systematic reporting of (fraud) because it's a very general category." Despite the obstacles, some researchers have sought to shed light on the gravity of the issue. A study by the Association of Certified Fraud Examiners found that occupational fraud, defined as the misappropriation of an employer's resources or assets, produced losses of more than $2.9 trillion dollars worldwide in 2009. But that figure excludes consumer fraud such as telemarketing scams, which account for billions more in scuttled income. The ACFE study reached its conclusion by surveying 1,843 anti-fraud experts, who estimated that the typical organization is cheated out of 5 percent of its yearly revenue. Researchers then applied that percentage to the 2009 Gross World Product – $58.07 trillion – to calculate the final figure. Researchers roughly estimate that insurance fraud alone costs companies as much as $200 billion in false claims each year, driving up premiums for honest policyholders, said James Quiggle, senior executive at the Coalition Against Insurance Fraud, a consortium of consumer groups, companies and government agencies. "Private insurers are waking up to the fact that they have a problem," Quiggle said. "The industry is still not a hundred percent mobilized, but it is a lot more mobilized than even three years ago." Al Koehler, director and deputy commissioner of the N.C. Department of Insurance's criminal investigations division, said the state has seen a jump in fraud cases in recent years, a trend he blames on the ailing economy. Law requires insurance companies to report any instances of suspected fraud to the state. In 2010, Koehler's office fielded 3,470 such complaints. Last year, that figure climbed to 3,995, a 15 percent increase. North Carolina's southeastern region has not bucked the brunt. Every couple of months, a local person seems to pop up in the police blotter as facing criminal charges related to taking someone or some company to the cleaner's. Authorities in September charged Earl Gay, a 58-year-old from Leland, with embezzling $7,000 in life and accident premiums while working for American General Life and Accident Company.A former Bald Head Island homeowner, James Edward Whitley, ran a ponzi scheme that stole some $9 million from investors between late-2006 and mid-2009. He was sentenced Wednesday to 10 years in prison. The N.C. Attorney General's Office also has been raising alarms about what is has dubbed the "grandparent scam," where seniors are made to believe that their grandchild is in peril somehow and in need of money. Attorney General Roy Cooper said it is common practice among fraudsters to tell the grandparent that their grandson or granddaughter is in jail in some foreign country and in need of bail money. In 2011, 99 victims reported the scam to the state. Collectively, they lost $727,167. But given the fact that fraud goes widely underreported, the attorney general's office believes those losses represent the tip of the iceberg. Ponos has been accused of committing several acts of fraud around Wilmington. According to arrest warrants, police charged him with filing a false claim with Regions Bank, saying his account had been mistakenly debited $3,800. He allegedly got the bank to reimburse him even though the money was not actually missing. In another incident, Ponos was alleged to have written a check to Rhodes Jewelry to buy a Rolex for $9,000. Minutes later, according to the warrant, Ponos stopped payment on the check and was selling the watch to someone else for cash. Once someone falls victim to fraud, it often proves difficult to make them whole again. In the case of the grandparent scam, the attorney general's office moved successfully in some instances to stop the victim's wire transfer, but the fact that the scam artists probably are working from overseas makes it easier for them to elude prosecution. "Sometimes, you can't get your money back," Cooper said. "But even so, if you have filed a complaint, you've helped protect other people."We encourage people, strongly, to file complaints. You don't know what we might be able to do for you."